Ark Invest Stock Portfolio: Top 10 Picks

3. Roku, Inc. (NYSE:ROKU)

Number of Hedge Fund Investors  in Q1 2024: 39

Ark Investment Management’s Q2 2024 Stake: $762 million

Roku, Inc. (NYSE:ROKU) is a hardware and software firm that provides a platform to enable users to stream television content and hardware that allows them to view the content. Even though its shares are down by nearly 83% since 2020, Roku, Inc. (NYSE:ROKU) has managed to grow its market penetration in the streaming market. Between 2020 and 2023, Roku, Inc. (NYSE:ROKU)’s revenue has grown by 89% on an absolute basis. However, this growth isn’t enough to satiate Wall Street, as investors are worried about a general slowdown in US advertising performance and a plethora of streaming services. These fears aren’t helped by news such as Apple’s Apple TV+ being unprofitable. Roku, Inc. (NYSE:ROKU) is currently seeking to expand in international markets to keep up its pace of subscriber growth. This should take some time to materialize, which then makes a EV to sales ratio of 1.95 unsurprising.

Roku, Inc. (NYSE:ROKU)’s management commented on its international expansion plans during the Q1 2024 earnings call when it shared:

“However, the year-over-year growth rate of streaming services distribution in Q1 2024 was lower than the year-over-year growth rate in Q4 2023 due to lapping past price increases and higher mix-shift towards entry-priced ad-supported offerings. Devices revenue increased 19% year-over-year in Q1, driven by the expansion of retail distribution of Roku branded TVs. ARPU was $40.65 in Q1 on a trailing 12-month basis, flat year-over-year. This reflects an increasing share of streaming households in international markets where we are currently focused on growing scale and engagement. Q1 total gross margin was 44%, down slightly year-over-year. Platform gross margin of 52% was stable year-over-year, while devices gross margin was negative 5%, which was down 8 points year-over-year.”